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Minimum Wage Effects on Poverty and Inequality

Alexandros Karakitsios () and Manos Matsaganis ()
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Alexandros Karakitsios: Athens University of Economics and Business
Manos Matsaganis: Athens University of Economics and Business

No 1801, DEOS Working Papers from Athens University of Economics and Business

Abstract: Minimum wage effect on employment is one of the mostly studied fields in labour economics. Minimum wage is also considered as a redistributive tool but its efficiency is strongly doubted due to potential disemployment effect that may cause. In the present paper, redistributive ability of minimum wage is studied through microsimulation techniques and under several scenarios of employment elasticity. The results indicate that minimum wage can reduce poverty even under the presence of a disemployment effect. Though, this anti-poverty effect is limited as employment elasticity is more negative. Similarly, inequality decreases when minimum wage increases are adopted, but the redistributive effect is weaker when they cause job losses. The above indicate that minimum wage policies should be used with caution and always take into account any possible impact on employment.

Keywords: minimum wages; unemployment; poverty; inequality (search for similar items in EconPapers)
JEL-codes: I38 J01 J08 J58 (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-eur and nep-lab
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